Kirschenmann, Karolin
[VerfasserIn]
;
Korte, Josef
[Sonstige Person, Familie und Körperschaft];
Steffen, Sascha
[Sonstige Person, Familie und Körperschaft]
The Zero Risk Fallacy? Banks' Sovereign Exposure and Sovereign Risk Spillovers
Erschienen in:ZEW - Centre for European Economic Research Discussion Paper ; No. 17-069
Umfang:
1 Online-Ressource (62 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.3091616
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments 2017 erstellt
Beschreibung:
European banks are exposed to a substantial amount of risky sovereign debt. The “missing bank capital” resulting from the zero-risk weight exemption for European banks for European sovereign debt amplifies the co-movement between sovereign CDS spreads and facilitates cross-border financial-crisis spillovers. Risks spill over from risky periphery sovereigns to safer core countries, but not in the opposite direction nor for exposures to countries not exempted from risk-weighting. We consider the trade-off of benefits of sovereign debt (for banks and sovereigns) and spillover risk when applying risk-weights. More bank capital as well as positive risk-weighting for sovereign exposures mitigates spillovers